A working capital loan is short-term business funding used to finance a company’s day-to-day operations, like buying inventory or covering payroll. Common small business working capital loans are lines of credit, term loans, invoice financing, and merchant cash advances (MCAs). We reviewed working capital loan providers on costs, terms, and qualifications to identify the top six.
- OnDeck: Best overall for businesses with good credit in need of fast financing
- BlueVine: Best for businesses that need to borrow against their invoices
- Funding Circle: Best for businesses that want longer repayment terms
- SBG Funding: Best for business owners with lower credit
- National Funding: Best for equipment lease financing
- Lendio: Best platform for shopping around for the best rate and best terms
What Working Capital Loans Are
Small businesses needing to finance recurring expenses like payroll and inventory often use working capital loans. Working capital loans can be in the form of term loans, lines of credit, invoice factoring, or MCAs. Depending on the need, there are several financing alternatives available to small businesses.
The most common types of working capital loans and situations those loans would be good for businesses are:
- Term loan: Good for businesses that need extended repayment terms to manage their cash flow or to finance some renovations
- Line of credit: Good for businesses who need capital for operational cash flow and only need to borrow a portion of available funds
- Invoice financing: Good for businesses that have a cash crunch often caused by outstanding customer invoices and may not qualify for a line of credit
- MCA: Good for businesses that cannot qualify for any of the other options, have significant revenue through credit card transactions, and need short-term capital. The rates are often substantial.
A recent study showed that getting the working capital financing you need is directly correlated with growing your business. Whether your business needs a term loan, a line of credit, invoice financing, or an MCA, we’ve selected the best lenders in these categories from which to choose.
OnDeck: Best Overall Small Business Working Capital Loan
OnDeck
What We Like
- Fast funding
- Easy qualifications
- Online application
What's Missing
- High interest rates
- Origination fees
Features
- Starting Interest Rate: 9%
- Expected Annual Percentage Rate (APR): 10% to 100%
- Origination Fee: Up to 5%
- Loan Amount: $5,000 to $250,000
- Collateral: Blanket Uniform Commercial Code (UCC) filing
- Personal Guarantee: Required
- Repayment Term: Up to 18 months
- Repayment Schedule: Daily or weekly
- Minimum Credit Score: 600
- Minimum Annual Revenue: $100,000
- Minimum Time in Business: One year
- Funding Speed: One business day
Why we like it: OnDeck offers a short-term working capital loan with a repayment of 18 months. With a minimum FICO score of 600 and a requirement of being in business just a year, OnDeck’s working capital loans are competitive for newer businesses and for those owners with less than ideal credit. With each additional working capital loan you take out with OnDeck, the origination fees will decrease, which is a benefit for loyal customers.
BlueVine: Best Working Capital Loans Based on Invoices
BlueVine
What We Like
- Potential for large amounts of capital if needed
- Easy qualification
- Fast funding
What's Missing
- Limited eligibility (business-to-business, business-to-government invoices)
- Potential to be on the hook for financing if customer does not pay invoices
Features
- Discount Rate: 0.25% to 1.35% per week
- Expected APR: 13% to 70%
- Origination Fee: None
- Loan Amount: $5,000 to $5 million
- Advance Rate: 85% to 90%
- Repayment Term: Paid with invoice collection
- Personal Guarantee: Required
- Minimum Credit Score: 530
- Minimum Annual Revenue: $100,000
- Minimum Time in Business: Three months
- Funding Speed: One business day
Why we like it: BlueVine’s invoice factoring loan works for businesses that are dependent heavily on receivables for cash flow. Its terms are competitive, and the maximum amount of capital that a business can receive, at $5 million, is among the highest of those that we surveyed.
Funding Circle: Best for Longer Repayment Terms
Funding Circle
What We Like
- Longer repayment terms
- Competitive interest rates
- Relatively fast funding
What's Missing
- Not ideal for newer businesses given two-year requirement
Features
- Interest Rate: 4.99% to 27.79%
- Expected APR: 11% to 35%
- Origination Fee: 3.49% to 6.99%
- Loan Amount: $25,000 to $500,000
- Repayment Term: Six months to 10 years
- Repayment Schedule: Monthly
- Personal Guarantee: Required
- Collateral: Blanket UCC filing
- Minimum Credit Score: 620
- Minimum Annual Revenue: $120,000
- Minimum Time in Business: Two years
- Funding Speed: As soon as three days
Why we like it: Funding Circle’s one of the few working capital term loan providers that will offer terms out to 10 years on working capital loans. Its interest rates for qualified borrowers are very competitive. Approval and funding can occur in a matter of days in some situations.
SBG Funding: Best for Business Owners With Lower Credit
SBG Funding
What We Like
- Easier qualification standards
- Relatively fast funding
- Longer repayment terms
What's Missing
- Origination fees can be relatively high
- APR may be high for newer businesses or those with lower credit
Features
- Expected APR: 5% to 35%
- Origination Fee: Varies based on amount borrowed
- Loan Amount: $5,000 to $5 million
- Repayment Term: One to five years
- Repayment Schedule: Biweekly or monthly
- Personal Guarantee: Required
- Collateral: Blanket UCC filing
- Minimum Credit Score: 500
- Minimum Annual Revenue: $120,000
- Minimum Time in Business: Six months
- Funding Speed: As soon as three days
Why we like it: SBG Funding looks at factors beyond the business owner’s personal credit score to determine approval. It looks at business performance through bank statement records, credit card sales, and other indicators to determine qualification for financing.
National Funding: Best for Equipment Lease Financing
National Funding
What We Like
- Competitive interest rates
- Fast funding
- Fair qualification standards
What's Missing
- Frequent repayment cycle
- Higher minimum revenue requirements
Features
- Expected APR: 8% to 20%
- Loan Amount: $5,000 to $150,000
- Repayment Term: Three to five years
- Repayment Schedule: Daily or weekly
- Personal Guarantee: Required
- Collateral: Equipment
- Minimum Credit Score: 575
- Minimum Annual Revenue: $150,000
- Minimum Time in Business: Six months
- Funding Speed: Three business days
Why we like it: National Funding started out doing equipment leases and is a very competitive resource for businesses seeking lease financing for equipment. Its rates are competitive against other leasing companies, and credit qualification standards are relatively relaxed as the equipment you lease out will serve as collateral. National Funding also offers several other options for businesses whose owners have poor credit.
Lendio: Best for Shopping Around for the Best Deal
Lendio
What We Like
- Multiple options to obtain financing
- Online application is easy
- Once approved, funding can be relatively fast
What's Missing
- Qualification standards may vary based on type of loan
- Not obvious which lender may approve loan at time of application
Features
- Loan broker with an online application for financing
- One application gives you access to potentially multiple lenders and multiple loan types
- Partners with more than 70 lenders
- Funding in as little as 24 hours
Why we like it: Unlike the other lenders profiled, Lendio is a loan broker that serves as a connector between businesses in need of financing and more than 70 lenders that offer it. The application process is easy and convenient for business owners and allows you to receive multiple loan offers so that you can choose the one that best suits your business needs. Lendio offers each of the options outlined above as well as MCAs, business credit cards, and commercial mortgages.
How We Chose the Best Working Capital Loans
In our review of the best working capital loans, we looked at a variety of financing options that businesses desired, knowing that obtaining a fast business loan was often critical to helping the business out.
Our criteria for evaluating the best small business working capital loans:
- Repayment terms: How long will each funder give you to repay your loan?
- Rates and fees: How much will it cost to borrow money from each lender?
- Funding speed: Once a business is approved, how long will it take to get access to the funds?
- Minimum qualifications: What is the minimum length of time a business needs to be in operations, what is the minimum credit score, and what is the minimum annual revenue required?
- Collateral and guarantee requirements: Will the lender require some form of collateral and/or a personal guarantee for approval?
Bottom Line
Businesses with the ability to obtain working capital have a better chance of success. The types of working capital loans available vary based on the exact need the business has. Each of the providers we have listed will offer solutions to meet those needs.
